Policies & Procedures

About Research Administration at GSU

Policies and Procedures for Research and Sponsored Programs

Policies and Procedures for Research and Sponsored Programs

Allowable and Unallowable Costs on Sponsored Programs

Background

OMB Circular A-21, Cost Principles for Educational Institutions, identifies direct and Facilities and Administrative (F&A) costs that may be charged to federal research grants and contracts. The cost principles also identify those charges that cannot be charged to grants and are considered unallowable expenses.

OMB Circular A-21 offers four tests to determine the allowability of direct costs applied to federally sponsored agreements. Allowable costs must:

1. Be reasonable.
   

   a.	The costs must be necessary for fulfillment of the agreement and acquired by means consistent with federal and state laws and regulations.
   b.	Costs incurred must be consistent with institutional policies and practices.

   
   
2. Be allocable. A cost is allocable to a sponsored agreement if the goods/services involved are charged in accordance with the relative benefits received by that agreement.
   A cost is allocable to a sponsored agreement if:
   

   a.	it is incurred solely to advance the work under the sponsored agreement.
   b.	it benefits both the sponsored agreement and other work of the institution in proportions that can be approximated through use of reasonable methods.

   Important! Please note:
   Any cost allocable to a particular sponsored agreement may not be shifted (i.e. cost transfer) to another sponsored agreement in order to meet deficiencies caused by overruns or other funding considerations, to avoid restrictions imposed by law or by terms of the sponsored agreement, or for other reasons of convenience.

3. Be treated consistently throughout the University. Similar costs normally cannot be treated as both direct and indirect costs.
   
   
4. Conform to any limitations or exclusions in the sponsored agreement.

Costs incurred for common or joint objectives which cannot be identified specifically with a particular sponsored project should be treated as F&A costs. Examples included the cost of utilities, maintenance and operation; building and equipment use expenses; administrative costs, library costs, and student service costs. Most sponsored agreements include a percentage of the direct cost to cover these charges. This percentage is known as the Facilities and Administration rate.

Allowable and Unallowable Costs

A survey of allowbale and unallowable costs is provided below. In some cases costs may be "treated as F&A costs" and are not allowable as direct costs to a project unless allowed by the terms and conditions of the award or with prior written approval from the sponsor.

Accounts	Description	Type of Expense
Alcohol	Unallowable as an entertainment expense.	Unallowable
Animals	Allowable for the acquisition, care, and use of experimental animals, contingent upon compliance with the applicable requirements of the PHS Policy on Humane Care and Use of Laboratory Animals	Allowable
Books and Journals	If an organization has a library, books and journals generally should be provided as part of normal library services and treated as F&A costs.	Allowable
Consultant Services	A consultant is an individual retained to provide professional advice or services for a fee but usually not as an employee of the requiring organization.	Allowable
Donor Costs	Allowable for payment to volunteers or research subjects who contribute blood, urine samples, and other body fluids or tissues that are specifically project related.	Allowable
Dues or Membership Fees	Generally, allowable as an F&A cost for organizational membership in business, professional, or technical organizations or societies.	Allowable
Entertainment Costs	This includes the cost of amusements, social activities, and related incidental costs.	Unallowable
Equipment	Allowable for purchase of new, used, or replacement equipment as a direct cost or as part of F&A costs, depending on the intended use of the equipment.	Allowable
Fringe Benefits	Allowable as part of overall compensation to employees in proportion to the relative amount of time/effort devoted by the employees. Must be consistent with university policy.	Allowable
Insurance	Insurance usually is treated as an F&A cost.	Allowable
Salaries and Wages	Compensation for personal services covers all amounts, including fringe benefits, paid currently or accrued by the organization for employee services rendered to the grant-supported project.	Allowable
Stipends	Payments made to an individual under a fellowship or training grant in accordance with pre established levels. Payments are intended for living expenses during training.	Allowable
Telephone Cost	Basic phone is generally an F&A cost. Toll calls may be a direct cost providing the cost can be specifically identified to a sponsored agreement.	Allowable
Travel	Allowable as a direct cost where such travel will provide direct benefits to the project.	*Allowable
* Foreign travel requires prior approval from the Agency.

 

Administrative Costs

In most cases administrative costs are covered under the University's Facilities and Administrative Cost (F&A) rate and are not charged directly to a project unless specifically allowed by the terms and conditions of the award or with prior written approval from the sponsor.

A justification is needed from the PI to justify an "unlike circumstance" where an administrative type of cost would be accepted by a federal auditor. An unlike circumstance is determined as such due to the nature of the work being performed, such as creating a special or unique need or when there is extensive consumption/use of particular items.